Is it permissible for pledgees to sell pledged property before time limit in Vietnam?

Is it permissible for pledgees to sell pledged property before time limit in Vietnam?

Pursuant to Article 313 of the Civil Code in 2015 stipulating obligations of pledgees as follows:

1. Take care of and preserve the pledged property; if the pledgee loses or damages the pledged property, the pledgee must compensate the pledgor for the damage.

2. Do not sell, exchange, give or use the pledged property as security for the performance of another obligation.

3. Do not lease, lend, exploit the yield or income derived from, the pledged property, unless otherwise agreed.

4. Return the pledged property and related documents upon fulfillment of the secured obligation or where the pledge is substituted with another security.

Pursuant to Article 299 of the Civil Code in 2015 stipulating cases of realization of collateral as follows:

1. An obligator fails to perform or perform not as agreed an obligation when it falls due.

2. An obligator must perform the secured obligation before time limit due to his/her violation against the obligation as agreed or prescribed by law.

3. Other cases as agreed by the parties or prescribed by law.

Pursuant to Article 303 of the Civil Code in 2015 stipulating methods of realizing collateral as follows:

1. The securing party and the secured party may agree any of the following methods of realizing collateral:

a) Put collateral up for an auction;

b) The secured party sells collateral itself;

c) The secured party accepts the collateral as substitutions for the performance of obligations of the securing party;

d) Other methods.

2. If there is no agreement on methods of realizing collateral as prescribed in Clause 1 of this Article, the collateral shall be put up for auction, unless otherwise prescribed by law.

According to the above provisions, the pledgee has the right to sell the pledged property only when the pledge term has expired. The fact that Mr. M (the owner of the pawn shop) sells your motorbike to Mr. K before the pledge expires, which means that Mr. M has violated the law. You can sue to ask Mr. M to pay the cost and compensate you for the motorbike.

Is it permissible for owner of a property to reclaim his/her pledged property after the property is sold for a third party in Vietnam?

Pursuant to Article 133 of the Civil Code in 2015 stipulating protection of the interests of bona fide third parties with regard to invalid civil transactions as follows:

1. In cases where a civil transaction is invalid but the transacted property being a moveable property is not required to be registered and such property has already been transferred to a bona fide third party through another transaction, the transaction with the third party shall remain valid, except for the case specified in Article 167 of this Code.

2. In cases where a civil transaction is invalid but the transacted property is registered at a competent authority and such property has already been transferred to a bona fide third party through another transaction which is established according to that registration, such transaction shall remain valid.

In cases where the transacted property which is required to be registered has not registered at a competent authority, the transaction with the third party shall be invalid, except for cases the bona fide third party received such property through an auction or a transaction with an another party being the owner of such property pursuant to a judgment or decision of a competent authority but thereafter such person is not the owner of the property as a result of the judgment or decision being amended or annulled.

3. The owner of a property shall have no right to reclaim the property from the bona fide third party if the transaction with such party remains valid as prescribed in Clause 2 of this Article, but the owner may proceed against the party at fault to refund appropriate expenses and compensate for his/her damage.

As regulations above, in case the pledgee has sold the owner's property (when the mortgage term has expired) to a third person who is a bona fide third party, the transaction between the third person and the pawnshop owner will not invalidated (if the property is registered at a competent state agency).

If this is the case, the owner will not be able to claim his property from a bona fide third party, but the owner can still sue to ask the pledgee to reimburse the reasonable costs. and return the property to the owner.

What are the fines for receiving collateral without making a mortgage contract in Vietnam?

Pursuant to Clause 3.i and 7.a, Article 12 of the Decree 144/2021/NĐ-CP stipulating violations against regulations on management of business lines subject to security and order conditions as follows:

3. A fine ranging from 5.000.000 VND to 10.000.000 VND shall be imposed for any of the following violations:

i) Receive collateral without making a mortgage contract as prescribed by law;

7. Remedial measures:

a) Mandatory return of the illegal profits earned from commission of the administrative violations specified in Points dd, i, k, l, m, n and r Clause 3; Points d, dd and k Clause 4 and Point b Clause 5 of this Article;

As regulations above, a fine ranging from 5.000.000 VND to 10.000.000 VND shall be imposed for receiving collateral without making a mortgage contract in Vietnam. In addition, the pledgee shall return the illegal profits earned from commission of the administrative violations.

Best regards!